April, 2023
During the month, the Lazard Global Managed Volatility Fund outperformed its MSCI All Country Index benchmark (in AUD, net of fees). Stock selection and sector positioning both contributed to the excess return. Stock selection was led by consumer discretionary and industrials. Financials and information technology holdings lagged. Allocation wise, the underweight to information technology and overweight to consumer staples added the most value. The underweight to energy detracted. Regionally, selection was strongest in Japan and the United States and weakest in the UAE and India.
File:March, 2023
In a quarter marred by the second largest US bank failure, a state-coerced bank merger and slowing corporate earnings, global markets still managed to post a gain of 7.3% (MSCI ACWI in USD as of 31 March 2023).
Fueling the optimism that dominated in January and March, many investors made the case that central banks would pivot from their hard line, anti-inflation stance. The extraordinary rise in global interest rates over the past 18 months continues to stifle lending and create potential asset-liability mismatches, while stoking conjecture over bank solvency. Easing inflationary pressures especially in Europe and the sudden fragility in the banking sector have fueled expectations of a central bank pivot. Inversion in the US and European yield curves, often a harbinger of recession, lessened in March but remained in place. The US dollar fell modestly during the quarter, despite higher nominal US rates. Oil prices sagged on fears of a global recession but ticked up at quarter-end on speculation of potential production cuts.
Regionally, broad-based gains were seen across most developed markets. Asian markets led during the month but lagged for most of the quarter. European markets led during the quarter as inflationary pressures continued to abate, fueling speculation that the European Central Bank (ECB) may be one of the first central banks to pivot from their tight monetary policies. At the same time, easing in supply constraints, lower input price pressures, and jobs growth sent the Eurozone Purchasing Managers Index higher for the fifth straight month. The United States, led by its large technology companies, outperformed the broader global benchmarks with the tech-heavy NASDAQ 100 rallying nearly 17% in the quarter. China reported its fastest rate of growth in non-manufacturing sectors (services) since 2011 but emerging markets lagged developed markets in the quarter.
While regional gains were evenly distributed throughout March, sector performance diverged considerably. A resurgence in technology and communication services stocks was the primary driver of the quarter’s strong return as technology stocks finished 20% higher for the quarter. The financial sector lost 1.5% in the quarter as rumors of multiple potential failures swirled around US regional banks and briefly Deutsche Bank. Weakness in oil prices helped make energy the worst-performing sector in the quarter.
Factor performance over the quarter was dominated by several broad-based themes, including a strong preference for larger cap and less leveraged companies. In our view, this was a function of concerns over the increasing likelihood of tighter lending standards resulting from the banking crisis. Less risky stocks (low beta and volatility) outperformed in March but lagged in the quarter. Sentiment lagged in the quarter driven by the selloff in momentum stocks in January. While companies with lower leverage and higher return on equity (ROE) outperformed, those with better operating margins did not. Growth measures were favorable for the quarter while value was mixed favoring more defensive equities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2023-03.pdfFebruary, 2023
The Lazard Global Managed Volatility Fund gained 1.71% during the month (net of fees), outperforming its MSCI All Country Index benchmark. Stock selection contributed to the excess return; sector positioning detracted. Stock selection was led by consumer discretionary and financials. Allocation wise, the underweight to materials and energy added the most value, which was offset by the underweight to information technology. Regionally, selection was strongest in Japan and China, and weakest in the US and Korea.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2023-02.pdfJanuary, 2023
The Lazard ACW Global Managed Volatility Fund lost 2.0% during the month (net of fees in AUD terms), underperforming its MSCI All Country benchmark. Both stock selection and sector positioning detracted. Stock selection was led by utilities and healthcare. Allocation wise, the underweight to energy and overweight to communication services added the most value. But these were offset by the overweight to consumer staples. Regionally, selection was strongest in India and Thailand, and weakest in the US and Japan.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2023-01.pdfDecember, 2022
The Lazard Global Managed Volatility Fund outperformed its MSCI All Country World Index benchmark (net of fees in AUD terms) during the quarter. Both stock selection and sector positioning accounted for the excess return. Selection in consumer discretionary and healthcare were beneficial; Holdings in industrials and materials were the largest detractors. Underweights to information technology and consumer discretionary were the largest contributors along with operating cash. Underweights to energy and financials detracted. Regionally, selection was strongest in the United States and Switzerland, and weakest in Taiwan and Singapore. Alpha was mixed but positive as value measures offset weakness in sentiment which suffered large drawdown in November. Quality measures were flat to positive. Growth measure underperformed in October and December but overall, it was flat. Global stocks closed out 2022 with a monthly decline of 3.8% to finish the year with a loss of over 18%, its worst result since 2008. The US dollar continued its recent weakness helping pare the loss for US investors. The broad themes of 2022 - inflation, rising interest rates, war in Ukraine and slowing corporate profits, continued to dominate investor fears in December. Inflation showed signs abating but remained well above central bank targets causing the US Federal Reserve (“Fed”) to maintain its hawkish tone. The inverted yield curve, tepid consumer spending and weak manufacturing orders all point to a likely recession in 2023 with the bond market anticipating that the Fed will soften its tone in response. The Bank of Japan surprised the market by easing yield curve control by 25 basis points as they dealt with the highest inflation in over 40 years and an increasingly illiquid market for Japanese bonds. Chinese officials also began to relax their zero-COVID policies to boost domestic spending and international travel. Unfortunately, it also resulted in a near term surge in COVID cases at year-end. European inflation appears to have peaked in October but remains well above the European Central Bank targets. While the eurozone remains in a recession, optimism that the contraction will not be as deep as initially feared, surfaced in December. Asian markets, led by China, posted a positive return for the month but was the worst region for the year. North America (United States) markets trailed in the month as the US proved to be one of the weakest markets. Small cap stocks lost ground in the month but outperformed the board market indices. Sector dispersion was relatively modest with defensive sectors (utilities and consumer staples) leading for the month. Information technology and consumer discretionary shares lagged. Factor performance reflected investor trepidation as low beta and less volatile stocks outperformed in December. Value measures enjoyed a second strong month and were the best performing factor for the year in both developed and emerging markets. Beyond preference for defensive, value stocks, emerging and developed markets showed divergence in investor factor preferences. Growth measures sold off in developed markets, most notably in Japan but were favoured in emerging markets. Price momentum lagged again in emerging markets even after the extraordinary sell-off in November. Stocks with favourable sell-side analyst revisions underperformed in developed markets but were favoured in emerging markets. Quality measures were favoured in developed markets but showed mixed results in the emerging markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-12.pdfNovember, 2022
The Lazard Global Managed Volatility Fund underperformed its MSCI All Country World Index benchmark (net of fees in AUD terms) during the month. Sector positioning accounted modestly for the performance, while stock selection detracted. Stock selection was led by holdings in the energy sector. Holdings in industrials and materials were the largest detractors. Allocation wise, the underweight to energy added the most value, which was offset by the underweight to materials.
Regionally, selection was strongest in Canada, and weakest in the United States and China. Stocks that made the largest contribution to return included Japan Tobacco (JT), whose shares rallied over the month after the company and Altria Group accounted a joint venture to commercialise Ploom heated tobacco sticks products in the US. In our view, integration of the domestic tobacco business into JT will enhance the company’s competitive position in reduced risk products and organisational restructuring of the domestic tobacco business will free up some resources for RRP marketing and R&D investment. Japan Post delivered a strong month reaching its six-month peak. The Japanese government has financial and political incentives to ensure that the environment supporting the company’s profitability remains benign. Gilead Sciences continued its strong performance following solid third-quarter results that displayed the strength of the company’s dominant HIV regimen as well as oncology therapies. Sales were well ahead of market expectations, mostly due to continuing demand for the company’s COVID-19 drug. Detractors in the month included Kellogg, whose share price fell following Q3 2022 results.
The organic growth of 13% was largely driven by higher prices. Similar to its peers, Kellogg has strained to keep up with the rapid evolution of consumer trends which has weighed on volume growth. Public Storage’s stock continued to struggle throughout the month despite a decent set of numbers in the third quarter earnings results. We see increasing signs of growth moderation in the upcoming years with a slowing economy and additional storage supply coming to market. Molina Healthcare’s shares saw significant movement during recent months, with the share price falling after the third quarter earnings call.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-11.pdfOctober, 2022
In October, the Lazard Global Managed Volatility Fund returned 5.7 (net of fees) underperforming its MSCI All Country Index benchmark by 1.0%. Stock selection accounted for the performance, while sector positioning detracted. Stock selection was favorable in five of eleven sectors, led by consumer discretionary and communication services. Allocation wise, the underweight to consumer discretionary and overweight to health care added the most value, which was partially offset by the underweight to energy. Regionally, selection was strongest in the US, and weakest in Japan and Canada. Stocks that made the largest contribution to return included Gilead Sciences, whose shares rose significantly by 13% after reporting third quarter results which topped expectations and boosted its full- year profit and sales outlook. The company generates stellar profit margins with its HIV and HCV portfolios, which require only a small salesforce and inexpensive manufacturing. Merck announced positive top-line results from the pivotal phase 3 Stellar trail evaluating the safety and efficacy of sotatercept. The stock rallied throughout the month. Shares of Everest rebounded strongly in October, responding positively to the third quarter earning calls. The reinsurer consistently grows its portfolio without substantially changing the risk profile. The management is targeting over 13% shareholder returns by 2023. Detractors in the month included WH Group, which reported third-quarter results that trailed the market’s estimates of revenue and operating profit. The deterioration in the operating margin was primarily caused by the upstream business across China and the US. Yamazaki Baking reported the third quarter earnings in the month and the result missed analysts’ forecasts. Bread companies in Japan have been hit hard by soaring material prices, as well as the declining population. SinoPac Financial reported missed performance for the first half of the year. The weakening in financial markets has generally led to a decline in banks’ wealth management business.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-10.pdfSeptember, 2022
The Lazard Global Managed Volatility Fund lost 0.49% during the month outperforming its MSCI All Country World Index benchmark by 3.09%. Both sector positioning and stock selection accounted for the excess return. Stock selection was favorable in all sectors led by health care and industrials. Sector allocation was helped by the underweight to information technology and overweight in consumer staples. Utilities holdings was the only sector that underperformed.
Stocks that provided the largest benefit to the Fund’s excess return were all in the health care sector. Bristol-Myers Squibb announced scientific research across several solid tumors and received European Commission approval of Opdualag in unresectable or metastatic melanoma. A few analysts upgraded its ratings to overweight or buy during the month. Merck delivered a great month led by their blockbuster Keytruda as well as other oncology and vaccine recovery. There are some regulatory risks on Keytruda, but we believe, they are limited in the medium term. Eli Lilly continued its strong price momentum reporting favorable phase 3 results for a dermatitis medication. The company also received the first and only RET inhibitor approval from the FDA. Stocks that detracted in the month included Charter Communications, the judge order of USD 1.15 billion and the announcement of the retirement plan of the CEO cost the company’s price declined 28% in September. Comcast Corporation’s broadband business has stagnated, with the company adding no net subscribers over the most recently reported periods, as the demand seen through the COVID pandemic cooled off. Portland General Electric’s price suffered a sharp decline after the company shut off power for 37,000 customers in early September to protect against wildfires.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-08-1.pdfAugust, 2022
The Lazard Global Managed Volatility Fund lost 1.4% during the month (net of fees), outperforming its MSCI All Country World Index benchmark by 0.6%. Both sector positioning and stock selection accounted for the excess return. Stock selection was favorable in five of eleven sectors, led by financials and health care. Holdings in utilities and consumer discretionary detracted the most. Allocation wise, the underweight to information technology and overweights to consumer staples and utilities added the most value, which was partially offset by the underweight to energy. Regionally, selection was strongest in the US, and weakest in Japan and China.
Stocks that made the largest contribution to return included Yapi ve Kredi Bank, as the bank reported a 64% increase in their quarterly profits. Margin expansion attributable to inflation linked loans drove most of the profit increase as Turley experienced inflation levels close to 80%. The increase in net interest income was accompanied by a decline in non-performing loans adding to investor enthusiasm for the stock. Gilead Science raised its full-year guidance after reporting a solid second quarter. Gilead said it expects total product sales between $24.5 and $25 billion for the year, compared to its guidance issued in February for between $23.8 and $24.3 billion in sales. It also expects total product sales between $22 and $22.5 billion, compared with its previous outlook for sales between $21.8 and $22.3 billion. Banco do Brasil increased its 2022 results forecasts after delivering better-than-expected second quarter earnings, boosted by higher net interest income and cost control measures. The company said in a securities filing it now expects full-year adjusted net profit to reach between 27 billion reais and 30 billion reais ($5.30 billion-$5.89 billion), up from $23-26 billion reais in the previous forecast.
Detractors in the month included Verizon Communications, which slashed its full-year earnings outlook as customers pull back on spending from red-hot inflation, while the telecommunications conglomerate posted lower second-quarter profit that missed Wall Street's expectations. Pressure caused by inflation within the company's cost structure, especially on labor, utilities, and logistics expenses, is expected to accelerate in the second half and have an impact of profitability and earnings. Bristol-Myers Squibb’s share price is in retreat mode after the company announced that its mid-stage blood thinner candidate, milvexian, missed the mark on a composite endpoint consisting of new symptomatic ischemic stroke and new covert brain infarction at day 90. Milvexian is a key component of the company's strategy to power through a slew of upcoming patent expirations. Zoetis detracted, as net Income was flat year-on-year in the second quarter, but primarily due to the strong US dollar. Underlying growth was strong, with revenues up 8% and net income up 9% operationally, despite specific headwinds in macro and one legacy product. Zoetis has continued to make strong progress on new products, though there was bad news in some businesses. 2022 guidance was tightened slightly on an operational basis.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-08.pdfJuly, 2022
The Lazard Global Managed Volatility Fund gained 1.9% (net of fees) during the month underperforming its MSCI All Country World Index by 3.5%. Both sector positioning and stock selection accounted for the shortfall. Stock selection was favorable in two of eleven sectors: real estate and energy. Holdings in utilities and consumer discretionary detracted the most. Allocation-wise, the underweights to financials, materials and energy was more than offset by the underweight for information technology and overweight to consumer staples. Regionally, selection was strongest in China and the UK, and weakest in the US and Japan. Stocks that made the largest contribution to return included Jack Henry, which announced that it has now connected over 250 financial institutions to either The Clearing House’s RTP network and/or the Zelle Network. PayCenter provides a quicker, more cost effective, efficient conduit to the faster payments networks.
The proprietary hub also enables financial institutions to accelerate time to market with faster payment solutions that expedite funds availability and improve cash flow. Cadence Design System lifted its fiscal 2022 forecast for sales and earnings and said long-term trends such as hyper-scale computing, autonomous driving, and artificial intelligence are pushing the demand for its products and services. The software firm now sees adjusted earnings per share of between $3.89 and $3.97 compared with its previous guidance range of $3.70 to $3.80. Keysight Technologies announced that AI-LINK has selected Keysight’s 5G test tools for end-to-end performance validation of cloud-native 5G radio access network (RAN) equipment in a digital twin laboratory environment, which accelerates 5G private network deployments for large-scale smart warehouse applications. Detractors in the month included Verizon Communications, which slashed its full-year earnings outlook as customers pull back on spending from red-hot inflation,
while the telecommunications conglomerate posted lower second-quarter profit that missed Wall Street's expectations. Pressure caused by inflation within the company's cost structure, especially on labor, utilities and logistics expenses, is expected to accelerate in the second half and have an impact of profitability and earnings. Tokyo Gas detracted, as the electric power and gas sector faces uncertainty about earnings stemming from higher fuel and raw material prices. The share price was weighed down in the near term by concerns over LNG supply from the Sakhalin 2 project. Procter & Gamble set out an annual profit outlook that would seem to miss Wall Street's estimates due to foreign exchange and cost headwinds, while the consumer goods company reported mixed fiscal fourthquarter results. The company pegged fiscal 2023 organic revenue growth at 3% to 5%, which would reflect a slowdown from a 7% gain reported in the year ended.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-07.pdfJune, 2022
After May’s brief relief rally, global equity markets resumed their plunge, falling another 8.5% in June. The global equity markets are now down more than 20% (in USD terms) in 2022, marking the worst start to a year in over 50 years. Inflation levels have continued to surprise to the upside, fueled by ever higher oil and commodity prices, labor shortages, and ongoing supply chain disruptions.
Central banks have broadly acted in a coordinated fashion to fight inflation, with 45 banks raising rates thus far in 2022. The Peoples Bank of China and Bank of Japan are two notable exceptions. The US Federal Reserve has remained a focal point as it has maintained an increasingly hawkish tone in the face of stubbornly high inflation numbers. The European Central Bank warned that the era of low interest rates and low inflation has ended, aggravated by the Ukraine invasion and global pandemic, and forecasted a larger interest rate hike in September following a 25-basis-point (bps) increase in July. Consumer confidence continued to wane, and recessionary fears in Europe and the United States were a primary concern, creeping into the oil markets, which fell nearly 10% (in USD terms) in June.
Nevertheless, oil prices were still 40% above year-end 2021 levels. The Ukraine war has placed additional upward pressure on food prices and European energy costs, which are likely to continue rising going into the fall, barring a resolution to the conflict. Japan’s loose monetary policy continued to put downward pressure on the yen, which reached a 24-year low against the US dollar in June. In a month with little other positive news, China modified its COVID-19 lockdown policies
and reported a modest increase in industrial production, lifting the equities market 7% (in USD terms) in June—the only major market to finish in positive territory for the month. That helped emerging markets to outperform developed markets both for the month and for the first half of 2022. Every sector finished in negative territory in June; recessionary fears inflicted the largest losses on the material and energy sectors. Energy stocks were the only
sector with a positive return year to date. The defensive healthcare and consumer staples sectors posted minor losses. Small cap stocks lagged by nearly 2% in June, matching the loss in large cap stocks for the year.The market decline in June was felt across every region as higher beta and more volatile stocks underperformed, with the notable exception of higher volatility stocks in emerging markets. Beyond this broad risk aversion, factor performance again diverged across regions in June. Value measures, which have worked well globally for most of 2022, reversed notably in emerging markets and the United States. Defensive value measures in Europe and Japan were rewarded. Growth measures were favored for the first time this year except in Japan. In another first for the year, sentiment measures were flat to negative except in Europe where they continued to work well. Despite the market decline, quality measures also were out of favor except in Europe
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-06.pdfMay, 2022
A sharp rebound at month-end pulled the global equity markets into positive territory, resulting in a 0.1% gain (in USD terms) in May. Volatility remained elevated, and many indices neared bear-market status (a fall of 20% in USD terms) at mid-month before equities rallied. Signs of a slowing in inflationary pressures and a potential easing of COVID-19 restrictions in China contributed to the rally.
Central bank policies continued to dominate investor sentiment as the banks attempted to control inflationary pressures through tighter monetary policies. The 60 interest-rate-hike announcements this year are the most since 2000. The US Federal Reserve has remained a focal point as the US economy has been healthy and appears capable of withstanding higher interest rates without falling into a recession. Corporate earnings remained strong despite some higher-profile disappointments in the technology and retail spaces. Ongoing supply chain issues continued to hinder global growth, particularly affecting China where pandemic restrictions are likely to result in negative GDP growth in the second quarter, well below the 5.5% target set by the People’s Bank of China. Central banks in China, Japan, and Russia stood out for remaining accommodative. The war in Ukraine continued to drag on, with neither side showing any meaningful progress. Russia
was increasingly ostracized as Finland and Sweden both submitted applications to join NATO, and several countries, including the United Kingdom, looked for ways to cease buying Russian oil and gas.
Oil prices pushed higher in May, rising another 7%, but remained below their peak in mid-March. The ongoing spike in oil prices continued to benefit energy stocks, which led the equity market with a rise of over 12% (in USD terms) during the month. Utilities also posted a positive month. Investors shied away from consumer stocks, however, as several prominent retailers announced disappointing results and provided weak guidance. Real estate stocks also sold off.
Despite the slowdown in China and higher US interest rates, emerging markets finished May in positive territory. Small cap stocks virtually matched the returns of their large cap counterparts. As in April, factor performance remained fairly consistent across regions in May. Value continued to work well across all regions, with defensive measures, including low price-to-earnings ratios, proving especially effective. By contrast, growth factors continued to lag across the globe again with the exception of Japan. Quality and market sentiment measures, including price momentum, were favored except in Europe. Low beta and low volatility stocks were mixed, remaining in favor in the United States and emerging markets but underperforming in Europe and Japan.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-05.pdfApril, 2022
The sell-off in global equity markets accelerated in April. Majorindices fell 8% (in USD terms) forthe month, and the markets entered a correction—a loss of 10%
(in USD terms) or more—for the year. Every developed market dropped in the month and, with the exception of certain oil- and commodity-dominated markets, emerging countries also suffered.Rising inflation ultimately stoked the selling as the US Federal Reserve, European Central Bank, Bank of England, and several other central banks continued totighten their monetary policies to fight it, thus raising the likelihood of a recession. Interest rates moved higher throughout the developed markets, with the notable exception of Japan as the central bank there continued its stimulative policies. The US dollar continued to strengthen, increasing the country’s trade imbalance and slowing its inventory growth as GDP dropped 1.4% in the first quarter. The sharp appreciation of 1.7% in the US dollar caused US equities to lag global markets in April. The war in Ukraine raged on, with horrific costs to people and property. The war also wreaked havoc with the commodity markets; oil prices remained highly volatile, finishing up 4% (in USD terms) in April but well below their March peak. Emerging markets equities dropped in April but held up well comparatively. However, China’s 4% (in USD terms) fall extended its decline to 17% (in USD terms) for the year as the country continued to impose severe.
COVID lockdowns in major cities, including Shanghai and Beijing, and attempted to grapple with its overbuilt real estate sector. The lockdowns have placed additional pressure on supply chains. Consumer staples and energy stocks led the markets, with growth-oriented sectors, namely communication services and information technology, continuing to sell off.
Factor performance converged across markets in April, a reversal from the trend of the pastfew months. Risk measures, including beta and volatility, and smaller cap all underperformed during the month. Value enjoyed a strong month, with defensive factors including low price-to-earnings ratios proving especially effective.Quality gauges were generally favorable, particularly in the United States; Japan was the notable exception. Growth factors lagged across the globe. Sentiment indicators were mixed, with price momentum still working in most markets, while stocks favored by sell-side analysts provided mixed
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-04.pdfMarch, 2022
The global equity markets rebounded in March but nevertheless finished their worst quarter since the onset of the COVID-19 pandemic. Commodity- and energydominated markets led, continuing their strong relative performance for a sixth month, while importers broadly lagged. Emerging markets equities fell for the third straight month and are down nearly 7% (in USD terms) for the year.
The Ukraine war raged into its second month with no sign of resolution. Russia faced nearly worldwide condemnation, its stocks were removed from the major indices, and the country enacted capital controls to rescue the ruble. While Russia continued to sell oil and gas into global markets, including Europe, some importers pursued other suppliers, sustaining prices well above pre-invasion levels. Inflation continued to be the major worry as it escalated globally. While initial inflation pressure was spawned by higher commodity prices, it has now spilled into wages: Labour shortages have led to wage increases, applying upward pressure on prices. The Federal Reserve raised its discount rate by 25 basis points in March and assumed a hawkish stance, telegraphing six more hikes for 2022. The US yield curve inverted at two years, often a recessionary indicator. Europe also experienced the highest inflation in more than 40 years as higher energy prices and natural gas rationing took hold. The European Central Bank is also expected to raise rates this year, with the discount rate likely to cross zero by year end.
The Bank of Japan, by contrast, has remained steadfast in its accommodative monetary policy, sending the yen tumbling. China’s shares fell 8% in March as the country closed down numerous cities and manufacturing facilities under its zero COVID policy, threatening growth. Pressure on China from many countries fora more punitive stance toward Russia continues to build.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-03.pdfFebruary, 2022
The sell-off in the global equity markets continued in February, driven in large part by Russia’s invasion of Ukraine, which sent the markets down by 5.4%. The two-month decline of 7.2% marks the worst start to a year since 2009. The Russian invasion beginning on 24 February and the increasingly aggressive actions and rhetoric from President Vladimir Putin, including placing Russian deterrent nuclear forces on high alert, drew a loud chorus of condemnation and reprisals from around the world. The markets had become increasingly apprehensive over the possibility of an invasion, and the actual outbreak did send volatility measures higher, but they remain well below levels seen during the COVID-19 outbreak and Global Financial Crisis. Oil prices surged with the potential withdrawal of Russian oil from the world markets, and Brent crude closed above $100 per barrel at the end of the month, up from $73 at year end. Safe havens rallied, including gold and the US dollar. Oil- and commodity-dominated stock exchanges led in February, with the likes of Peru, Indonesia, Australia, United Arab Emirates, and Mexico posting gains of 3% or more (in USD terms). Russia and its neighbors, Hungary and Poland, sold off more than 10% (in USD terms) in the month, albeit with trading in Russia suspended on the last day of the month.
In oil-importing countries, including China, India, and Germany, equity markets also declined more than 5% (in USD terms) in February. By sector, materials and energy stocks led the pack in February, with both posting positive returns. Defensive segments of the market also outperformed. While the global uncertainty created by Russia’s invasion of Ukraine may reduce pressure on the US Federal Reserve to raise interest rates as aggressively as feared, investors continued to avoid longer duration, growth-oriented stocks. This included information technology and consumer discretionary stocks, which have fallen more than 12% (in USD terms) in 2022.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-02-2.pdfJanuary, 2022
Global equity markets stumbled into 2022 and fell more than 5% (in USD terms) in January, their worst month since March 2020. However, while the markets have given up their gains from the second half of 2021, they remain more than 70% above their 2021 lows. US Federal Reserve officials pointed to a path of steady interest rate increases in 2022, beginning in March, and the increasingly hawkish tone unnerved investors.
High inflation and a tight labor market continue to be focal points for the Fed as it tries to achieve a balance between moderate economic growth and lower inflation. Increasing tensions over the potential for Russia to invade Ukraine and an escalation of Omicron COVID-19 infections after the holidays also contributed to a difficult month, particularly as the threat of a Russian invasion pushed oil prices ever higher. Investors took little solace in January earnings reports even as 70% of the corporations that reported exceeded consensus expectations. Both the percentage of
companies that beat estimates and their margin above estimates were below those in the very strong third quarter but were well above long-term averages. Interest rates moved higher across most markets, and most yield curves remained flat, with the notable exception of the United States. Technology and healthcare shares led the market decline, while higher oil prices and interest rates kept shares of energy and financial stocks in positive territory. Despite the strengthening US dollar and a very difficult 2021, emerging markets outperformed developed markets. Oil-dominated stock exchanges were market leaders for the month. Continental Europe was particularly weak. Factor returns were remarkably consistent across markets as investors favored value measures to an overwhelming extent. Growth indicators were out of favor and detracted from performance across the globe. Sentiment measures, including price momentum and analysts’ estimate revisions, were flat. Despite the market decline, quality measures lagged in January, which, in large part, is attributable to the strength of energy and financial stocks. Risk measures also showed
mixed results, with both low volatility stocks and higher beta stocks outperforming. Different measurement periods partially explain this paradox: Beta is calculated on a three-year basis, while volatility is measured daily over 12 months.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2022-01.pdfDecember, 2021
Global equity markets finished 2021 with a 4% (in USD terms) gain in December, capping another strong year for equity investors. Although Omicron, the COVID19 variant that surfaced in November, proved to be more infectious than the Delta strain, investors took consolation that it also appeared to be far less virulent.
The emergence of new antiviral pills and increased vaccination rates in developed countries also reduced the fear of another global shutdown. A further signal of the improving US economy came from the Federal Reserve, which announced that it would reduce its bond purchases sooner than expected in 2022 and forecast
three interest rate increases in 2022. Both the Bank of England and European Central Bank followed with similar monetary tightening moves. These all helped to alleviate concerns over inflation and an overheating of the global economy. The Bank of Japan remained an outlier, adhering to its stimulus policies, which sent the yen to multi-year lows. The prospect of higher interest rates overall, China’s efforts to deflate its property and debt bubbles, and rising commodity prices put a damper on emerging markets equities, which underperformed developed markets by 2.4% in December and 24.4% for the year in USD terms, their worst relative
year since 2013.VWhile the equity markets in general enjoyed strong gains in December, sector leadership rotated, as utility and consumer staples stocks rallied 8% (in USD terms) in the month. Consumer discretionary stocks fell modestly and were the weakest sector in 2021, as valuation concerns and the impact of inflation on discretionary consumer spending continued to worry investors
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardGlobalManagedVolatilityFund_FactSheet_2021-12.pdfNovember, 2021
The Lazard Global Managed Volatility Fund gained 4.3% in the month (Net of fess), outperforming its MSCI All Country World Index benchmark which returned 3.4%.
Stock selection accounted for the excess return, as sector positioning lagged. Selection outperformed in seven of eleven sectors led by financials and consumer staples. Holdings in information technology and energy detracted the most. The underweights to financials and energy was more than offset by the underweight to information technology. Regionally, selection was strongest in continental Europe and China, and weakest in the US and Japan.
Stocks that made the largest contribution to return included Costco, as its COST growth strategies, better price management, decent membership trends and increasing penetration of e-commerce business have been contributing to its upbeat performance. Cumulatively, these factors have been aiding the company in registering impressive sales and comparable sales numbers. Japan Post Bank performed well after releasing its third quarter results. The company raised its full year guidance for profits from ¥260bn to ¥350bn, principally on improvement in net interest income compared to the initial expectation. Factors contributing to the improvement in net interest income include lower foreign currency funding costs, a rise in gains from the redemption of foreign bonds, and greater-thanexpected private equity fund distribution. Qualcomm posted record quarterly sales and forecast further growth amid surging demand for 5G smartphones in the face of supply-chain constraints. The mobile-phone chip giant, whose processors are in many new 5G handsets, said sales rose 12% to $9.3 billion in its fiscal fourth quarter, generating a $2.8 billion profit, exceeding expectations.
Detractors in the month included Quebecor, reported largely in-line financial results; however, Telecom EBITDA underperformed, declining 1.4%. Analysts remain cautious on the stock in the near term due to uncertainties around its wireless expansion plans. Yapi ve Kredi Bankasi, the Turkish bank came under pressure as the lira slumped after President Tayyip Erdogan defended recent sharp interest rate cuts, in what analysts called a reckless and premature monetary easing. The Turkish lira lost 11% of its value, crashing to a record low of 13.45 lira per dollar as investors panicked after Erdogan vowed to win his "economic war of independence", defending an aggressive easing cycle. Sainsbury’s detracted, as falling recent sales after its Argos business was knocked by supply chain challenges and a post-lockdown easing of demand. Argos sales slumped 12% year on year in the third quarter, with the group blaming “supply challenges, unseasonal weather and lower demand for home office equipment and technology.”
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-11.pdfOctober, 2021
Following September’s sell-off, the global equity markets turned in their best monthly performance of the year, rising 4.7% in USD terms October. Many indices
touched or exceeded all-time highs during the month. A very strong start to corporate earnings season provided the fuel for the rally. Thus far, nearly 70% of developed markets companies have exceeded earnings expectations. Despite inflationary pressures, companies have been able to maintain their operating margins as demand has remained high. Nevertheless, inflationary pressures remain, and the supply chain disruptions continue to hamper the global recovery. Oil prices resumed their upward climb, and many agricultural commodity prices surged in October. The yield curve continued to flatten, portending a move to higher interest rates in the upcoming year. Manufacturing Purchasing Managers Indices (PMIs) fell in the United States, Germany, and France, but the composite rose
overall, illustrating the uneven nature of the recovery. On the other hand, shipping rates, a poster child for supply chain imbalances, began to retreat, signaling a potential alleviation of a major bottleneck in the recovery. The October rally was broad-based, with every sector posting a positive return. Consumer discretionary stocks, recovering from September’s sell-off, were thestrongest sector for the month. Energy stocks also outperformed the broader market as they have for most of the year. Consumer staples and communicationservices sectors lagged in October, reflecting investors’ continued appetite for growth. Factor performance showed a continued preference for higher beta stocks
in every region except Europe. Despite this risk preference, large cap stocks outperformed small caps, and developed markets stocks beat emerging marketscompanies again in October. Quality and sentiment measures, including price momentum, worked well across both developed and emerging markets. Growthmeasures were in favor for one of the few months this year. Value metrics lagged broadly, except for in the United States, where defensive value (lowprice/earnings) performed well.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardGlobalManagedVolatilityFund_FactSheet_2021-10_en.pdfSeptember, 2021
A broad-based decline in September pushed the global equity markets to a minor loss for the quarter, their first quarterly decline since the onset of the globalpandemic. The US Federal Reserve’s stimulus policy path was a focal point as they announced preparations to slow the monthly purchase of government backed bonds, but also to raise interest rates in 2022. In Europe, the European Central Bank and the Bank of England (BoE) also signaled they were prepared to retreat From their accommodative monetary policy stances while in Asia, the Bank of Japan announced that it would hold its accommodative monetary policy steady to support the Japan market. Broad-based supply chain disruptions continue to hamper the global recovery, creating inflationary pressures on everything from agricultural produce to electronics to medical supplies. Shipping rates have more than doubled in the past five months. After a dip in August, oil prices reached highs not seen since 2014. China was another source of worry amid data indicating that the country’s economy was slowing. Compounding this anxiety was theongoing crackdown by Chinese regulators on certain domestic sectors in the name of general prosperity. The news that the debt-laden real estate developer Evergrande could default on its obligations prompted contagion fears as real estate represents a disproportionate 28% of the Chinese economy. Energy was strongest sector in the third quarter, which has led the market (+35% in USD terms) in 2021. The prospect of higher interest rates benefitted banks, which ended the quarter positively. Falling commodity prices and a stronger US dollar made materials stocks one of the worst-performing sector. Factorperformance was overall positive for the quarter mainly driven by a strong July. The quarter finished with a style rotation into value measures across the global
markets. Sentiment measures, including price momentum, worked well in the United States but were mixed in Europe and underperformed in Japan and the emerging markets. Growth and quality measures continued to underperform in line with their year-long trend. Despite the sell-off in September, higher beta andmore volatile stocks outperformed in the developed markets, notably in the United States. However, both lower volatility and low beta stocks were rewarded in the emerging markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-09_en.pdfAugust, 2021
The global equity markets continued their historic recovery with a seventh straight monthly gain in August. Momentum was strong as many indices posted multiple all-time highs during the month. The United States, overcoming a decline in consumer confidence, continued to lead the major equity markets. Federal Reserve Chairman Jerome Powell calmed investors’ fear of a sharp curtailment in the central bank’s stimulus programs while indicating that economic strength was sufficient for the Fed to consider a modest reduction in its bond repurchase program. The euro area reported surprisingly strong GDP growth for the second quarter, outpacing most major economies, including those of China and the United States. Corporate earnings in Europe recovered further as vaccinations increased and the economy continued to reopen. European sell-side analysts raised their earnings estimates at a historically high rate. Japan also posted a positive month but trailed other markets; its economy grew more than expected in the second quarter, counteracting the effects of the spike in COVID-19 cases that had caused a sell-off in July. The spike will likely temper growth in the third quarter. The favorable economic news and low interest rates benefitted the emerging markets, which outpaced the developed markets in August. China noticeably lagged, though, as the regulatory authorities continued their industry-specific crackdown. August’s focal point was the gaming industry as regulators sought to limit the time children can spend on online gaming.
Sector performance showed only modest dispersion in August, with every sector except materials posting a positive return. Financials were the strongest sector for the month and have taken leadership from energy for the year. Global factor performance was also relatively muted in the month. Risk measures showed mixed results as lower beta stocks and stocks with higher volatility over the past year outperformed. Emerging markets were the exception as August was a pronounced “risk-off” month for investors. Other factor measures exhibited regional differences: The United States and emerging markets favored value and sentiment measures at the expense of growth and quality, while Europe and Japan were the mirror opposite, and growth and quality measures were rewarded.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-08_en.pdfJuly, 2021
The global equity markets notched their sixth consecutive monthly gain in July, boosted by strong corporate earnings and record low interest rates. COVID-19 vaccination rates continued to improve in the developed markets despite the spread of the new Delta variant, which slowed reopening in some countries. Central banks maintained their accommodative policies to foster economic growth, and interest rates declined to levels only slightly above the pandemic lows of a year ago. Inflation fears abated as oil and commodity prices leveled off over the month. The other major influence on the equity markets in July was China’s crackdown
on technology and private tutoring businesses, which added a political risk component to securities from that fast-growing economy. The selloff that resulted drove shares in China down 13% overall, which contributed to an 8.5% difference in returns between the developed and emerging markets in July. Tech stocks in China had their worst month since 2008. Most developed markets, led by the United Kingdom, United States, and continental Europe, finished in positive territory. Japan’s market gave ground, however, as the Delta variant created a state of emergency, and spectators were banned from the Olympic Games in Tokyo.
The disparity in regional equity performance carried over to the global sectors. Technology led the market in July largely due to record earnings at many US companies. Defensive sectors, including real estate and utilities, also fared well as investors sought their yields, which were generally higher than those in the fixed income markets. Energy stocks underperformed, giving back some of their 2021 gains, but remained the best-performing sector in 2021. Consumer discretionary stocks also fell; investors became more defensive due to the uncertainties surrounding virus variants, corporate earnings outlooks, and the Chinese government’s actions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-07_en.pdfJune, 2021
The rally in the global equity markets continued as they posted their fifth straight quarterly gain. The major equity indices are now more than 25% (in USD terms) above their pre-pandemic highs. Broad, though bumpy, progress in global COVID-19 vaccinations and a sharp pick-up in corporate earnings continued to provide ample support for the 15-month rally. The threats of inflation and a tapering of monetary stimulus from the central banks have been largely discounted in the market rally so far but remain sources of worry for the second half of the year. The United States gained the most among major markets, helped in part by the strong US dollar, which rallied more than 2% in June. The dollar rally held back performance in the European markets finishing the quarter just behind the US.
Asia markets struggled as the emergence of COVID-19 variants in Japan and India, along with weaker economic figures in China. Despite the weakness in Asia and Africa, emerging markets managed to outperform their developed markets counterparts. Oil prices increased nearly 10% in June as inventories remain low and production cuts continue in effect. Other commodities, including gold and lumber, fell sharply, with supply imbalances correcting and inflation concerns abating.
Technology shares led the market, as growth stocks have returned to favor over the past six weeks. Energy stocks also rallied with the increase in oil prices andremained the best-performing sector for the year. Material and financial stocks sold off with the rotation away from value into growth. The financial sector, however, remained the second-best performer so far this year. Regional divergence in factor performance increased in June, reflecting, in part, the disproportionate vaccination
progress and the uneven economic recovery. Investors’ risk appetite reemerged in June as more volatile and higher beta stocks outperformed in the global markets except for Europe. The rotation away from value back into growth measures continued through June, with the exception of the emerging markets where value remained in favor. Sentiment indicators were also broadly favorable except in the United States. Quality measures underperformed globally.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-06_en.pdfMay, 2021
The Lazard Global Managed Volatility Fund gained 1.4% during the month, equalling its MSCI AC World Index benchmark. Sector positioning aided returns whilst stock selection dragged. Selection outperformed in four of eleven sectors, led by communication services and information technology. Holdings in financials and materials detracted the most. Sector positioning was helped by the underweights to information technology and consumer discretionary and overweight to consumer staples, which was partially offset by the underweights to energy and financials. Regionally, selection was strongest in the United States and Korea, and weakest in Asia including Japan. Stocks that made the largest contribution to return included KT Corporation, as the South Korean telecommunications firm’s net profit in the first quarter soared 43.7% to USD510m compared to a year ago. The higher net profit in the reported period was the result of a rise in new 5G users and new technology businesses.
Shares of Danish pharmaceutical Novo Nordisk rose after the company adjusted their guidance. It now expects 2021 sales growth of 6% to 10%, compared with the previous sales growth guidance of 5% to 9%. Operating profit growth is projected to be between 5% and 9%, compared with the prior guidance of between 4% and 8%. CVS Health hiked its 2021 forecast and beat the Street's first quarter expectations. The company’s growing insurance business offset the impact from a mild cold and flu season. The company covered more people through Medicaid and Medicare Advantage, and adjusted operating earnings from health insurance jumped nearly 20% in the first quarter to USD1.78 billion. It also delivered more than 23 million COVID-19 tests and 17 million vaccine doses through
April, which helped its drugstore business. Detractors in the month included Fisher & Paykel Healthcare. Shares sold off, as investors took profit after the New Zealand--Medical equipment maker announced record full-year earnings ending 31 March. Earnings climbed 82% as the pandemic drove an increase in sales of respiratory devices to hospitals. Electric Power Development detracted, as analysts revised their profit forecast to reflect unplanned stoppages at coal-fired thermal plants in Japan and the slump
in prices on the JEPX wholesale electric power exchange. Although they expect capacity utilization to improve at coal-fired plants in 2022, they lowered recurring profit forecast for 2022 as well, as they expect JEPX prices to remain low. Dollar General, shares retreated after reporting first quarter 2021, as n
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-05_en.pdfJanuary, 2021
The Lazard Global Managed Volatility Fund lost -0.9% during the month, trailing its MSCI AC World Index benchmark by 1.1%. Both stock selection and sector positioning led to the month’s shortfall. Selection outperformed in four of eleven sectors led by consumer staples and financials. Holdings in communication services and consumer discretionary detracted the most.
Sector positioning was helped by the overweight to health care, which was more than offset by the overweight to consumer staples. Regionally, selection was strongest in Asia including Japan and Europe, and weakest in the United States and emerging Asia. Stocks that made the largest contribution to return included Eli Lilly, which continued to rally, as favourable results for its type 2 diabetes medicine, tirzepatide, along with a favourable court ruling on a patent case helped to boost the stock. Speculation that several new biotech developments for the treatment of Alzheimer’s were imminent also caused a number of upgrades for the stock. Electric Power Development (EPDC), the Japanese utility, bounced back, as wholesale power prices in Japan hit record highs with rising demand for heating with frigid temperatures gripping much of the country. Thermo Fisher Scientific, which reported better-than-expected fourth-quarter results as the maker of laboratory equipment and diagnostic kits saw higher pandemic-driven demand for its testing products and other services. Revenues in the three months through December rose to USD10.55 billion from USD 6.83 billion in the prior-year quarter.
Detractors in the month included Colgate-Palmolive, which traded down as analysts reported that it may see continued strength in fourth quarter revenue, but it would only partially benefit net income due to logistics/input cost inflation and higher advertising levels. They noted that ColgatePalmolive's total oral care underlying sales likely would slow a bit from third quarter levels, while underlying growth in personal care, home care and pet segments are projected to decline just modestly from the September quarter due to "continued elevated consumption levels." Procter & Gamble lagged the broader market and the sector since November, as the momentum shift worked to its disadvantage. The stock has enjoyed excess returns since their successful brand consolidation and this has restored their organic growth and operating margins. Analyst sentiment continues to favour the company and it continues to rank well on our metrics. Verizon continued to lag the market significantly for the third month in a row. Bidding in the FCC’s C-Band spectrum auction has reached a price 15 times last year’s level and investors are skeptical that the additional revenue opportunities are worth the price. This coupled with the subscriber pressure being applied by T-Mobile/Sprint has caused the sell-off in the stock. Looking forward to 2021, we view the return to global economic growth with reasonable optimism. We see the end or a significant reduction of the global pandemic likely realised by the close of 2021.
European governments have enacted fiscal stimulus packages and we expect that the European Recovery fund will play a strong role in helping these economies to rebound in 2021. China has already rebounded from the virus and appears on track to reaching its goal as the world’s largest economy by 2025. Asian trading partners will likely be pulled along by China’s growth. Fiscal and monetary stimulus, coupled with low interest rates has left investors with little regard to underlying fundamentals and the risks of equity investing. At some point, all good things will end.
We believe that the stimulus levers of the central banks are close to exhaustion. Negative real interest rates are ultimately inflationary, and in our view, will likely precipitate a reversal in monetary policy especially as the economy begins to recover and growth to levels that exceed pre-pandemic levels. We believe that the seeds are sown and properly nurtured to promote such growth. Equity markets are, by their nature, forward looking and their recent action appears to be consistent with this outlook for favourable economic growth. When such economic growth materializes, we expect that the central banks will use the opportunity to “rearm” themselves by tightening in monetary policy especially if there are signs of inflation.
This would start to provide investors with a viable alternative to equities (real rates of interest). The implications of a global recovery and tighter monetary policy on the equity markets are several. First, we believe that broad economic growth will favourably affect a broader set of companies especially those who have managed to sustain themselves through the pandemic but have been unable to grow due to the poor economic climate. Leadership should be much less concentrated as a result.
Second, we believe that fundamentals (valuation) of companies will assume greater importance. The generation of free cash flow, improving operating margins and return on equity will be rewarded as much as the promise of a business disruptor at any price. Finally, we believe that risk will again be priced into the equity markets and that higher-risk stocks will start to exhibit volatility in both directions as investors move away from macro themes such COVID and trade war beneficiaries to companies that execute consistently through time.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/LazardLazardGlobalManagedVolatilityFund_FactSheet_2021-01_en.pdfasset_class: Foreign Equity
asset_category: Large Blend - Quantitative
peer_benchmark: Foreign Equity - Large Quantitative Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: LAZ1240AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
Right sidebar -> Fact Sheet
fund_features:
Lazard Global Managed Volatility AUD Inc seeks to achieve total returns (including income and capital appreciation and before the deduction of fees and taxes) in excess of the MSCI All Country World Index (“benchmark”) with lower volatility over the long term.
- The Fund will invest in listed companies which as a whole we expect will have lower volatility than the benchmark over a full market cycle.
- The number of securities will generally range from 175 to 350 which means Lazard makes active investment decisions as to which securities the Fund holds.
- The Fund is able to invest up to 25% in emerging markets.
- The Fund is constructed by blending risk and stock ranking assessments, with the aim of producing the best possible return to risk ratio over time. The Fund is constructed according to broad diversification principles, including market capitalisation, region, position size and industry. The Fund may also invest in initial public offerings which are expected to be listed within 3 months from the date of purchase.
structure: Managed Fund